A Foreign Affair with Minnesota Companies

The solution is to pack up and visit the people on the other side of the transaction. “You have to go there and meet people face to face, establish personal relationships and rapport. Do it in person, or 80 percent of it in person,” Fafinski suggests.

For the remaining communication, use e-mail to your advantage. “I’m amazed at how much easier electronic document transfer and communication have become,” says Mike McFadden, co-CEO of Minneapolis-based Lazard Middle Market, an investment bank that provides merger and acquisition services.

“Americans constantly underestimate what cultural differences can mean to bringing a transaction together,” Fafinski says. In the worse cases, culture issues can scuttle a deal. In South America, for instance, “their view of the calendar and the clock is very different than ours,” Fafinski says. English and Irish businesspeople are often similar to Americans, but Asian firms “can be frustrating to work with, because their view of an agreement and our view of an agreement are not the same thing. You find yourself renegotiating points you thought were settled,” Fafinski says. Germans sometimes resist varying their forms and methods. “We did a German deal recently in which it took us a month to get the right form of a letter of credit—one that was acceptable to both parties and the correspondent banks involved,” he says.

You may find yourself talking with different people within a foreign organization than you would at home. “Communications with more junior people aren’t as available as they might be here,” Humke says. In the U.S., you’d talk to the controller who monitors inventory to negotiate an inventory reserve issue, for instance. But in some other cultures, particularly in Asia, you’ll negotiate every detail with the senior buy-side negotiator.

In China, for example, “A lot of the legal framework is dictated by the province,” says Bob Frost, a former managing director for mergers and acquisitions at Piper Jaffray, an investment firm in Minneapolis. “Property rights are different, and many companies are state-owned,” he says. Frost notes that some Chinese businesses are becoming more privatized, but they often have different ownership structures than we see in the United States.

Frustrations over cultural differences aren’t just on the U.S. side, either. “I think foreign firms view us as aggressive, shoot from the hip, over-the-top people,” Fafinski says. “Even the most conservative American firms want to make a decision and move on. That can make conservative foreign investors wary.”